Jharkhand High Court Denies Bail in Rs 781.39 Crore GST Fraud Case Involving Fake Firms and Bogus Invoices

The accused, Sumit Gupta, alleged to be the mastermind behind the creation and operation of 135 bogus firms, was charged with causing a massive financial loss of Rs. 781.39 crores to the government exchequer. The court highlighted the severity of Gupta's actions, which included forgery, fraud, and the exploitation of economically vulnerable individuals during the COVID-19 pandemic.

Justice Subhash Chand, presiding over the case, remarked “Even an ordinary person of country is paying CGST & SGST of central and state government for the building and development of nation and state but the persons like petitioner who is white-collar criminals impede and obstruct the development of nation and state as well by creating fake and bogus firm committing forgery in well planned manner in cool calculation and dishonest design with a vulture eye on personal profit causing huge loss of public funds, affects economy of nation and state, should be dealt with different approach to send the eye opening message to such white-collar criminals of society.”

The court's decision came after a thorough review of the complaint, which detailed the petitioner's involvement in creating and operating 135 fake firms across Kolkata and Jharkhand.

Gupta was accused of recruiting economically disadvantaged individuals, particularly during the COVID pandemic, under the guise of offering jobs. These individuals were then used to create bogus firms, with their credentials and digital signatures obtained under false pretences. The petitioner managed these firms for a few months before cancelling them by submitting letters to the GST Department.

The court noted that the petitioner had engaged numerous agents and used online platforms to contact job-seekers, offering them employment after conducting fake interviews. These individuals were then used to open bank accounts and create bogus firms, with the petitioner paying them small pecuniary benefits during the process.

Further investigation revealed that these firms fraudulently availed fake input credit and passed it on to various other firms, causing a significant loss to the government exchequer. The court highlighted that there was verified material on record, including statements from individuals associated with these fake firms, indicating that no actual business activities were conducted. Many of these individuals were unaware that GST registration had been taken in their names and that they were listed as directors or proprietors of the bogus firms.

The court concluded that the petitioner, without the knowledge of the so-called directors, proprietors, and other staff, had facilitated the passing of inadmissible and indelible input tax credit to various firms without the supply of underlying goods or services. This resulted in a wrongful availment or utilization of input tax credit and significant revenue loss to the government.

Justice Chand further stated that the offense of forgery, being punishable with life imprisonment, could not allow for the acceptance of the petitioner's plea for bail, despite the petitioner's three-month judicial custody and the unlikelihood of a swift trial conclusion. The court also noted that the petitioner's role was distinct from that of a co-accused who had been granted bail, emphasizing the petitioner's mastermind role in creating the fake firms.

Taking into consideration the allegations, verified materials on record, and the cognizance order passed by the Presiding Officer, Special Court Economic Offences, Jamshedpur, the court denied the bail application and rejected the petitioner's request for bail.

Case Title: Sumit Gupta @ Sumit Kumar Gupta vs Union of India

LL Citation: 2024 LiveLaw (Jha) 136

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